I recently read a comment on Reddit where one user suggested that Bitcoin and other cryptocurrencies because they weren't “real money.” I generally try to keep an open mind to new opinions, and as I thought more about his statements, I realized he was entirely correct. Bitcoin isn’t “real” money because it isn't created by a central bank, it doesn't have the backing of an official government, and it doesn’t have patriotic pictures of historic events on it. Granted, Bitcoin isn't real money - here’s why that fact is completely irrelevant.
If you go to Investopedia.com, you can read a nice long definition of what constitutes true money. It is supposed to be a store of value, a medium of exchange, and the website even tells you a little bit about the history of money and how money originated. All of those things are incredibly important (as well as correct), but they overlook one key consideration. We don't value money for its own intrinsic sake, we value it for what it can do for us and what it can purchase.
In fact, money is basically worthless from an intrinsic standpoint. Suppose that you are stranded in the middle of the desert with a $1 bill, or suppose that you are the lone survivor of an apocalypse with access to all of the money in the Federal Reserve vaults. What can you do with that? Other than enjoying the artwork on the back of the dollar bills, there's very little actual use-value for these small pieces of paper. I'm using this example to demonstrate that we don't value money in and of itself - we value it for its ability to provide us with certain products and services we want.
Money is like a bridge or a translator. It allows us to take our talents and our efforts, and exchange them for the things that we want in our lives. When I get my monthly paycheck, I don't pile up dollar bills in my living room. I use them to buy food, clothes, and put gas in my car. I work to earn money, but I actually work for a car, house, and food. Money is simply the intermediary between my efforts as a producer and my needs and wants as a consumer.
I know it's a little bit of an older article, but I recently came across a short video skit where Google claimed that “cryptocurrency isn’t real money but money isn’t real either.” It is kind of ironic, but Google is helping me prove my point in more ways than one. Every day, digital payments through credit cards, debit cards, and cell phone apps increase which means that less and less actual physical cash is traded. So, Google is correct that every day, money becomes less and less real. In other words, traditional, fiat money is becoming more and more like cryptocurrencies in the fact that they are simply represented as a digital entry on some computer ledger. Any criticism made against the digital nature of Bitcoin would be equally valid against the increasingly digitized nature of traditional fiat money as well. And yet, we see that even digital fiat money is incredibly valuable. The fact that cryptos and fiat are both not "real" doesn't mean that they are not valuable.
Further, and perhaps more importantly, Google is helping prove my point that the entire concept of money doesn't even matter. I recently received a pair of socks from Google. How did I get these socks? I didn't buy them with real money, nor did I use cryptocurrency. Instead, I received them for something less “real” than either money or even crypto. I received these socks in return for my time and attention writing reviews. Whenever I visit a new location, Google will ask me to write a brief review of my experience to help other customers decide whether or not it is a place they want to shop or visit. I have written enough reviews and helped enough people that I am a certified "Local Guide", and Google sends me rewards from time to time.
If cryptocurrencies like Bitcoin aren't real money, they surely, something as nebulous as my attention and talents must be considered even less real. Nevertheless, I've been able to receive an actual, tangible, physical product that I need by trading something (my time and effort) that isn't considered money for that product. This is the point that I'm trying to drive home. It doesn't matter whether I purchased the socks with fiat currency, cryptocurrency, or with my time and talents. It is important to separate the concepts of "money" and "value". Yes, money is valuable, but value is not confined to "real" money. Value can just as easily be transmitted, stored, and exchanged through cryptocurrency as it is with fiat. It's not the money that matters - it is the products and services that money can buy that are important.
Cryptos aren't real, but who cares? All that matters is that cryptos act like a bridge that allows people to trade their time, efforts, and talents for physical products that they need in their lives. One person has used their crypto earning to help pay hospital delivery fees for their new child, while another has used their earnings to purchase a new computer. The fact that these products and services weren’t purchased with “real” money is completely irrelevant. All that matters is that people were able to trade their productive efforts for the products and services that they needed. The actual medium used to facilitate this transfer of value is insignificant. Yes, Bitcoin isn’t real money, money isn’t real, and none of that makes it any less valuable.
Image Credit: https://unsplash.com/@deanmaddocks